A blockchain may be used as a public ledger to store information. Since any individual or entity can provide information to a blockchain, this information should be reviewed and confirmed. This operation is known as consensus. There are two types of consensus centralized and decentralized. Centralized consensus includes one central database that is used to rule transaction validity. A decentralized consensus transfers authority and trust to a decentralized network and enables its nodes to continuously and sequentially record their transactions on a public “block”, creating a unique “chain” referred to as a blockchain. Cryptography, via hash codes, is used with a blockchain to secure an authentication of a transaction source and removes the need for a central intermediary.
In a conventional daily ledger environment, a transaction person or ‘transactor’ presents a transaction in physical or digital form to their transaction institution. The institution posts the transaction to the distributed ledger. The posting process to the distributed ledger validates the transaction is compliant with minimum standards and encrypts the details so only authorized parties can decrypt and view such details. The distributed ledger notifies members of the new transaction on the corresponding network. Members review the transactions via publicly visible details to determine if they are eligible to process the transaction. An interested third party institution may decrypt the transaction details and further validate the transaction, for example, by ensuring the account is valid and the items mentioned in the transaction are available. The third party institution posts back to the distributed ledger its acceptance or rejection of the transaction. The posting process to the distributed ledger encrypts the response and the distributed ledger notifies members of the transaction's status being updated. The interested third party decrypts the updated information. Rejected transactions signal the third party institution will not honor the transaction. The current distributed ledger best practices advocate not including large amount of data in the ledger.